**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

**FORM 10-Q**

** **

**x****QUARTERLY REPORT PURSUANT TOSECTION 13 OR 15(d)**

**OF THESECURITIES EXCHANGE ACT OF 1934**

 

For the quarterly period ended **September 30, 2007**

 

**OR**

 

**o****TRANSITION REPORT PURSUANT TOSECTION 13 OR 15(d)**

**OF THESECURITIES EXCHANGE ACT OF 1934**

 

for the transition period from        to       

 

**Commission File Number 001-15253**

 

 

**JanusCapital Group Inc.**

(Exact name of registrant as specified in itscharter)

 

| **Delaware**                             | ** ** | **43-1804048**      |
|------------------------------------------|------------|---------------------|
| (State or other jurisdiction of          |       | (I.R.S. Employer    |
| incorporation or organization)           |       | Identification No.) |
|                                     |       |                |
| **151 Detroit Street, Denver, Colorado** | ** ** | **80206**           |
| (Address of principal executive offices) |       | (Zip Code)          |

 

**(303) 333-3863**

(Registrant’s telephone number, includingarea code)

 

**Not applicable**

(Former name, former address and formerfiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theCompany was required to file such reports), and (2) has been subject to thefiling requirements for at least the past 90 days.          Yesx               Noo

 

Indicate by check mark whether the registrant is a large acceleratedfiler, an accelerated filer, or a non-accelerated filer. See definition of “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer x | Accelerated Filer o | Non-Accelerated Filer o |
|---------------------------|---------------------|-------------------------|

 

Indicate by check mark whether the registrant is a shell company (asdefined in Rule 12b-2 of the Exchange Act).          Yes o             Nox

 

As of October 24, 2007, there were 170,466,879 shares of the Company’scommon stock, $.01 par value per share, issued and outstanding.

 

 

----

 

**PART I - FINANCIAL INFORMATION**

**Item 1.  Financial Statements**

 

**JANUS CAPITAL GROUP INC.**

**CONSOLIDATED BALANCE SHEETS (UNAUDITED)**

**(Dollars in Millions)**

** **
| ** **                                                                                   | ** ** | **September 30,  2007** | ** ** | **December 31,  2006(1)** | ** ** |
|----------------------------------------------------------------------------------------------|------------|------------------------------|------------|--------------------------------|------------|
| **ASSETS**                                                                                   | ** ** | ** **                   | ** ** | ** **                     | ** ** |
|                                                                                         |       |                         |       |                           |       |
| **Current assets:**                                                                          |       |                         |       |                           |       |
| Cash and cash equivalents                                                                    |       | $                            | 605.4      |                           | $          | 507.1 |   |
| Marketable securities                                                                        |       | 119.6                        |       | 173.1                          |       |
| Accounts receivable                                                                          |       | 140.1                        |       | 126.4                          |       |
| Income taxes receivable                                                                      |       | 1.2                          |       | 5.4                            |       |
| Other current assets                                                                         |       | 53.5                         |       | 41.6                           |       |
| Assets related to discontinued operations                                                    |       | 107.2                        |       | 157.6                          |       |
| Total current assets                                                                         |       | 1,027.0                      |       | 1,011.2                        |       |
|                                                                                         |       |                         |       |                           |       |
| Other assets                                                                                 |       | 117.6                        |       | 99.0                           |       |
| Property and equipment (net of accumulated  depreciation of $124.3 and $132.9, respectively) |       | 46.6                         |       | 47.2                           |       |
| Intangibles, net                                                                             |       | 1,313.3                      |       | 1,290.0                        |       |
| Goodwill                                                                                     |       | 1,140.1                      |       | 1,090.5                        |       |
|                                                                                         |       |                         |       |                           |       |
| Total assets                                                                                 |       | $                            | 3,644.6    |                           | $          | 3,537.9 |   |
|                                                                                         |       |                         |       |                           |       |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                |       |                         |       |                           |       |
|                                                                                         |       |                         |       |                           |       |
| **Current liabilities:**                                                                     |       |                         |       |                           |       |
| Accounts payable                                                                             |       | $                            | 2.3        |                           | $          | 1.8 |   |
| Accrued compensation and benefits                                                            |       | 98.7                         |       | 102.7                          |       |
| Other accrued liabilities                                                                    |       | 90.0                         |       | 69.9                           |       |
| Liabilities related to discontinued  operations                                              |       | 13.2                         |       | 17.7                           |       |
| Total current liabilities                                                                    |       | 204.2                        |       | 192.1                          |       |
|                                                                                         |       |                         |       |                           |       |
| **Other liabilities:**                                                                       |       |                         |       |                           |       |
| Long-term debt                                                                               |       | 1,127.6                      |       | 537.2                          |       |
| Deferred income taxes                                                                        |       | 399.1                        |       | 394.4                          |       |
| Other liabilities                                                                            |       | 62.6                         |       | 90.0                           |       |
| Total liabilities                                                                            |       | 1,793.5                      |       | 1,213.7                        |       |
|                                                                                         |       |                         |       |                           |       |
| Commitments and contingencies                                                                |       |                         |       |                           |       |
|                                                                                         |       |                         |       |                           |       |
| Minority interest in consolidated  subsidiary                                                |       | 7.5                          |       | 17.8                           |       |
|                                                                                         |       |                         |       |                           |       |
| **STOCKHOLDERS’ EQUITY**                                                                |       |                         |       |                           |       |
|                                                                                         |       |                         |       |                           |       |
| Preferred stock                                                                              |       | —                       |       | —                         |       |
| Common stock                                                                                 |       | 1.7                          |       | 1.9                            |       |
| Retained earnings (2)                                                                        |       | 1,823.4                      |       | 2,293.4                        |       |
| Accumulated other comprehensive income                                                       |       | 18.5                         |       | 11.1                           |       |
| Total stockholders’ equity                                                              |       | 1,843.6                      |       | 2,306.4                        |       |
|                                                                                         |       |                         |       |                           |       |
| Total liabilities and stockholders’ equity                                              |       | $                            | 3,644.6    |                           | $          | 3,537.9 |   |

 

----

| Notes:                                                                                   | (1)    | 2006 has been reclassified to separately present the assets and  liabilities of continuing and discontinued operations.See Note 4          |
|------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                     | (2)    | Retained earnings includes a cumulative-effect adjustment as of January  1, 2007, of $29.9 million for the adoption of FIN 48. See Note 5. |
|                                                                                     |   |                                                                                                                                       |
| The accompanying notes are an integral part of these consolidated  financial statements. |

 

1

----

 

**JANUS CAPITAL GROUP INC.**

** **

**CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)**

**(Dollars in Millions, Except Per Share Data)**

 
| ** **                                                  | ** ** | **Three months ended  September 30,** | ** **  | **Nine months ended  September 30,** | ** ** |
|-------------------------------------------------------------|------------|------------------------------------------------------|-------------|-----------------------------------------------------|------------|
| ** **                                                  | ** ** | **2007**                                             | ** **  | **2006 (****1)**                               | ** ** | **2007** | ** ** | **2006 (****1)** | ** ** |
|                                                        |       |                                                 |        |                                                |       |   |   |   |   |
| **Revenues:**                                               |       |                                                 |        |                                                |       |   |   |   |   |
| Investment management fees                                  |       | $                                                    |  228.5 |                                                | $          |  183.5 |   | $ | 650.0 |   | $ | 556.1 |   |
| Performance fees                                            |       | 5.1                                                  |        | 4.0                                                 |       | 11.4 |   | 12.5 |   |
| Shareowner servicing fees and other                         |       | 51.0                                                 |        | 41.5                                                |       | 144.1 |   | 126.0 |   |
| Total                                                       |       | 284.6                                                |        | 229.0                                               |       | 805.5 |   | 694.6 |   |
|                                                        |       |                                                 |        |                                                |       |   |   |   |   |
| **Operating Expenses:**                                     |       |                                                 |        |                                                |       |   |   |   |   |
| Employee compensation and benefits                          |       | 91.1                                                 |        | 70.7                                                |       | 265.3 |   | 232.3 |   |
| Long-term incentive compensation                            |       | 13.8                                                 |        | 17.0                                                |       | 49.5 |   | 62.0 |   |
| Marketing and advertising                                   |       | 6.5                                                  |        | 6.6                                                 |       | 16.6 |   | 19.7 |   |
| Distribution                                                |       | 35.4                                                 |        | 26.1                                                |       | 100.5 |   | 80.1 |   |
| Depreciation and amortization                               |       | 8.9                                                  |        | 7.6                                                 |       | 24.7 |   | 24.2 |   |
| General, administrative and occupancy                       |       | 33.1                                                 |        | 33.5                                                |       | 89.4 |   | 88.6 |   |
| Restructuring and impairments                               |       | —                                               |        | 10.5                                                |       | 0.4 |   | 10.5 |   |
| Total                                                       |       | 188.8                                                |        | 172.0                                               |       | 546.4 |   | 517.4 |   |
|                                                        |       |                                                 |        |                                                |       |   |   |   |   |
| **Operating Income**                                        |       | 95.8                                                 |        | 57.0                                                |       | 259.1 |   | 177.2 |   |
|                                                        |       |                                                 |        |                                                |       |   |   |   |   |
| Interest expense                                            |       | (18.9                                                | )           | (8.1                                                | )          | (39.9 | ) | (22.3 | ) |
| Other income, net                                           |       | 8.9                                                  |        | 8.0                                                 |       | 20.3 |   | 23.7 |   |
| Income before taxes, equity earnings and  minority interest |       | 85.8                                                 |        | 56.9                                                |       | 239.5 |   | 178.6 |   |
| Income tax provision                                        |       | (32.0                                                | )           | (20.4                                               | )          | (88.3 | ) | (64.7 | ) |
| Equity in earnings of unconsolidated  affiliate             |       | 1.9                                                  |        | 1.7                                                 |       | 5.3 |   | 5.4 |   |
| Minority interest in consolidated earnings                  |       | (4.9                                                 | )           | (5.6                                                | )          | (16.1 | ) | (16.2 | ) |
|                                                        |       |                                                 |        |                                                |       |   |   |   |   |
| Income from continuing operations                           |       | 50.8                                                 |        | 32.6                                                |       | 140.4 |   | 103.1 |   |
|                                                        |       |                                                 |        |                                                |       |   |   |   |   |
| Loss from discontinued operations                           |       | (38.6                                                | )           | (3.1                                                | )          | (43.8 | ) | (7.2 | ) |
|                                                        |       |                                                 |        |                                                |       |   |   |   |   |
| **Net income**                                              |       | $                                                    | 12.2        |                                                | $          | 29.5 |   | $ | 96.6 |   | $ | 95.9 |   |
|                                                        |       |                                                 |        |                                                |       |   |   |   |   |
| **Earnings per Share-Basic:**                               |       |                                                 |        |                                                |       |   |   |   |   |
| Income from continuing operations                           |       | $                                                    | 0.30        |                                                | $          | 0.16 |   | $ | 0.78 |   | $ | 0.50 |   |
| Loss from discontinued operations                           |       | (0.23                                                | )           | (0.02                                               | )          | (0.24 | ) | (0.04 | ) |
| Net income                                                  |       | $                                                    | 0.07        |                                                | $          | 0.15 |   | $ | 0.54 |   | $ | 0.47 |   |
|                                                        |       |                                                 |        |                                                |       |   |   |   |   |
| **Earnings per Share-Diluted:**                             |       |                                                 |        |                                                |       |   |   |   |   |
| Income from continuing operations                           |       | $                                                    | 0.29        |                                                | $          | 0.16 |   | $ | 0.77 |   | $ | 0.50 |   |
| Loss from discontinued operations                           |       | (0.22                                                | )           | (0.02                                               | )          | (0.24 | ) | (0.03 | ) |
| Net income                                                  |       | $                                                    | 0.07        |                                                | $          | 0.15 |   | $ | 0.53 |   | $ | 0.46 |   |

 

----

Note:  (1) Prior periods have been reclassified toseparately present the results of continuing and discontinued operations. SeeNote 4.

 

Theaccompanying notes are an integral part of these consolidated financialstatements.

 

2

----

 

**JANUS CAPITAL GROUP INC.**

** **

**CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)**

**(Dollars in Millions)**

 
| ** **                                                   | ** ** | **Nine months ended  September 30,** | ** ** |
|--------------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                   | ** ** | **2007**                                            | ** ** | **2006 (****1)** | ** ** |
| **CASH FLOWS PROVIDED BY (USED FOR):**                       |       |                                                |       |   |   |
| **Continuing Operations**                                    |       |                                                |       |   |   |
| **Operating Activities:**                                    |       |                                                |       |   |   |
| Net income                                                   |       | $                                                   | 140.4      |   | $ | 103.1 |   |
| Adjustments to net income:                                   |       |                                                |       |   |   |
| Depreciation and amortization                                |       | 24.7                                                |       | 24.2 |   |
| Deferred income taxes                                        |       | 27.0                                                |       | (8.6 | ) |
| Minority interest in consolidated earnings                   |       | 16.1                                                |       | 16.2 |   |
| Amortization of stock-based compensation                     |       | 33.0                                                |       | 53.7 |   |
| Realized gain on the sale of investments                     |       | (0.4                                                | )          | (5.7 | ) |
| Payment of deferred commissions, net                         |       | (26.2                                               | )          | 2.1 |   |
| Other, net                                                   |       | (5.5                                                | )          | 8.6 |   |
| Changes in working capital items:                            |       |                                                |       |   |   |
| Accounts receivable                                          |       | (13.7                                               | )          | 8.9 |   |
| Other current assets                                         |       | (3.0                                                | )          | (1.7 | ) |
| Accounts payable and accrued compensation  payable           |       | (3.5                                                | )          | (20.1 | ) |
| Other accrued liabilities                                    |       | 14.9                                                |       | 16.8 |   |
| Net operating                                                |       | 203.8                                               |       | 197.5 |   |
|                                                         |       |                                                |       |   |   |
| **Investing Activities:**                                    |       |                                                |       |   |   |
| Purchase of property and equipment                           |       | (13.6                                               | )          | (9.2 | ) |
| Acquisitions of INTECH                                       |       | (81.0                                               | )          | (90.0 | ) |
| Purchase of marketable securities                            |       | (62.0                                               | )          | (60.7 | ) |
| Proceeds from sales and maturities of  marketable securities |       | 120.4                                               |       | 90.8 |   |
| Escrow deposit                                               |       | —                                              |       | (113.1 | ) |
| Net investing                                                |       | (36.2                                               | )          | (182.2 | ) |
|                                                         |       |                                                |       |   |   |
| **Financing Activities:**                                    |       |                                                |       |   |   |
| Proceeds from issuance of long-term debt                     |       | 748.4                                               |       | 275.0 |   |
| Debt issuance costs                                          |       | (6.9                                                | )          | (2.1 | ) |
| Repayment of long-term debt                                  |       | (158.1                                              | )          | — |   |
| Proceeds from stock plans                                    |       | 51.4                                                |       | 35.1 |   |
| Excess tax benefit from equity-based  compensation           |       | 5.3                                                 |       | 4.0 |   |
| Repurchase of common stock                                   |       | (675.6                                              | )          | (388.4 | ) |
| Distributions to minority interest                           |       | (26.6                                               | )          | (21.8 | ) |
| Dividends paid to shareholders                               |       | (7.2                                                | )          | (8.3 | ) |
| Net financing                                                |       | (69.3                                               | )          | (106.5 | ) |
|                                                         |       |                                                |       |   |   |
| **Cash and Cash Equivalents:**                               |       |                                                |       |   |   |
| Net increase (decrease)                                      |       | 98.3                                                |       | (91.2 | ) |
| At beginning of period                                       |       | 507.1                                               |       | 501.0 |   |
| At end of period                                             |       | $                                                   | 605.4      |   | $ | 409.8 |   |
|                                                         |       |                                                |       |   |   |
| **Discontinued Operations**                                  |       |                                                |       |   |   |
| Operating activities                                         |       | $                                                   | (1.8       | ) | $ | 0.1 |   |
| Investing activities                                         |       | (1.4                                                | )          | (1.6 | ) |
| **Cash and Cash Equivalents:**                               |       |                                                |       |   |   |
| Net decrease                                                 |       | (3.2                                                | )          | (1.5 | ) |
| At beginning of period                                       |       | 52.6                                                |       | 51.6 |   |
| At end of period                                             |       | $                                                   | 49.4       |   | $ | 50.1 |   |
|                                                         |       |                                                |       |   |   |
| **Supplemental Cash Flow Information:**                      |       |                                                |       |   |   |
| Cash paid for interest                                       |       | $                                                   | 27.6       |   | $ | 22.1 |   |
| Cash paid for income taxes                                   |       | $                                                   | 51.2       |   | $ | 55.5 |   |

 

----

Note:  (1) Prior periods havebeen reclassified to separately present the results of continuing anddiscontinued operations.  See Note 4.

 

The accompanying notes are an integral part of these consolidatedfinancial statements.

 

3

----

 

**JANUS CAPITAL GROUP INC.**

** **

**CONSOLIDATED STATEMENTS OF CHANGES INSTOCKHOLDERS’ EQUITY (UNAUDITED)**

**(Amounts in Millions, Except Per Share Data)**

 
| ** **                                                                   | ** ** | **Shares** | ** ** | **Common  Stock** | ** ** | **Retained  Earnings** | ** ** | **Accumulated  Other  Comprehensive  Income** | ** ** | **Total  Stockholders’  Equity** | ** ** |
|------------------------------------------------------------------------------|------------|------------|------------|-------------------|------------|------------------------|------------|-----------------------------------------------|------------|---------------------------------------|------------|
|                                                                         |       |       |       |              |       |                   |       |                                          |       |                                  |       |
| **Balance at December 31, 2005**                                             |       | 216.0      |       | $                 | 2.2        |                   | $          | 2,569.3                                       |       | $                                     | 9.7        |   | $ | 2,581.2 |   |
|                                                                         |       |       |       |              |       |                   |       |                                          |       |                                  |       |
| Net income                                                                   |       |       |       |              |       | 133.6                  |       |                                          |       | 133.6                                 |       |
| Net unrealized gains on marketable  securities                               |       |       |       |              |       |                   |       | 15.4                                          |       | 15.4                                  |       |
| Net loss on cash flow hedge                                                  |       |       |       |              |       |                   |       | (2.4                                          | )          | (2.4                                  | )          |
| Reclassification for gains included in net  income                           |       |       |       |              |       |                   |       | (6.5                                          | )          | (6.5                                  | )          |
| Foreign currency translation adjustment                                      |       |       |       |              |       |                   |       | (5.1                                          | )          | (5.1                                  | )          |
| *Comprehensive income*                                                       |       |       |       |              |       |                   |       |                                          |       | 135.0                                 |       |
| Amortization of stock-based compensation                                     |       |       |       |              |       | 72.4                   |       |                                          |       | 72.4                                  |       |
| Issuance and forfeitures of restricted  stock awards                         |       | 0.3        |       |              |       |                   |       |                                          |       | —                                |       |
| Stock option exercises                                                       |       | 3.1        |       |              |       | 42.1                   |       |                                          |       | 42.1                                  |       |
| Common stock repurchased                                                     |       | (25.9      | )          | (0.3              | )          | (516.1                 | )          |                                          |       | (516.4                                | )          |
| Change of interest in subsidiary                                             |       |       |       |              |       | 0.4                    |       |                                          |       | 0.4                                   |       |
| Common stock dividends ($0.04 per share)                                     |       |       |       |              |       | (8.3                   | )          |                                          |       | (8.3                                  | )          |
| **Balance at December 31, 2006**                                             |       | 193.5      |       | 1.9               |       | 2,293.4                |       | 11.1                                          |       | 2,306.4                               |       |
|                                                                         |       |       |       |              |       |                   |       |                                          |       |                                  |       |
| Cumulative-effect adjustment for the adoption  of a new accounting principle |       |       |       |              |       | 29.9                   |       |                                          |       | 29.9                                  |       |
| Net income                                                                   |       |       |       |              |       | 96.6                   |       |                                          |       | 96.6                                  |       |
| Net unrealized gains on marketable  securities                               |       |       |       |              |       |                   |       | 6.5                                           |       | 6.5                                   |       |
| Amortization of net loss on cash flow hedge                                  |       |       |       |              |       |                   |       | 0.3                                           |       | 0.3                                   |       |
| Reclassification for gains included in net  income                           |       |       |       |              |       |                   |       | (0.2                                          | )          | (0.2                                  | )          |
| Foreign currency translation adjustment                                      |       |       |       |              |       |                   |       | 0.8                                           |       | 0.8                                   |       |
| *Comprehensive income*                                                       |       |       |       |              |       |                   |       |                                          |       | 104.0                                 |       |
| Amortization of stock-based compensation                                     |       |       |       |              |       | 33.0                   |       |                                          |       | 33.0                                  |       |
| Issuance and forfeitures of restricted  stock awards                         |       | 0.8        |       |              |       |                   |       |                                          |       | —                                |       |
| Tax impact of stock-based compensation                                       |       |       |       |              |       | 1.7                    |       |                                          |       | 1.7                                   |       |
| Stock option exercises                                                       |       | 3.0        |       |              |       | 51.4                   |       |                                          |       | 51.4                                  |       |
| Common stock repurchased                                                     |       | (27.0      | )          | (0.2              | )          | (675.4                 | )          |                                          |       | (675.6                                | )          |
| Common stock dividends ($0.04 per share)                                     |       |       |       |              |       | (7.2                   | )          |                                          |       | (7.2                                  | )          |
| **Balance at September 30, 2007**                                            |       | 170.3      |       | $                 | 1.7        |                   | $          | 1,823.4                                       |       | $                                     | 18.5       |   | $ | 1,843.6 |   |

 

The accompanying notes are an integral part of these consolidatedfinancial statements.

 

4

----

 

**JANUS CAPITAL GROUP INC.**

** **

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**

 

***(Unaudited)***

 

**Note 1 – Basis of Presentation**

** **

Inthe opinion of Janus Capital Group Inc. (“Janus” or the “Company”) management,the accompanying unaudited interim consolidated financial statements containall adjustments necessary to fairly present the financial position, results ofoperations and cash flows of the Company in accordance with accountingprinciples generally accepted in the United States of America (“GAAP”).  Such interim financial statements have beenprepared in accordance with the instructions to Form 10-Q pursuant to the rulesand regulations of the Securities and Exchange Commission (“SEC”).  Certain information and footnote disclosuresnormally included in financial statements prepared in accordance with GAAP havebeen condensed or omitted pursuant to such rules and regulations.  These consolidated financial statementsshould be read in conjunction with the Company’s Annual Report on Form 10-Kfor the year ended December 31, 2006.

 

The accompanying consolidated financial statements have been preparedon a consistent basis with the accounting policies described in Note 2 to theconsolidated financial statements that are presented in the Company’s AnnualReport on Form 10-K for the year ended December 31, 2006, except as discussedin Note 4 and Note 5. 

 

**Note 2 – Earnings Per Share**

** **

Basic earnings per common share is calculated by dividing net income bythe weighted average number of common shares outstanding during the period.  Diluted earnings per common share adjusts theweighted average shares outstanding by the dilutive impact of shares underlyingstock options and unvested restricted stock awards.  The following is a summary of the earningsper share calculation *(in millions, except pershare data)*:

 
| ** **                                                                                      | ** ** | **Three months ended  September 30,** | ** ** | **Nine months ended  September 30,** | ** ** |
|-------------------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                                                      | ** ** | **2007**                                             | ** ** | **2006**                                            | ** ** | **2007** | ** ** | **2006** | ** ** |
| Income from continuing operations                                                               |       | $                                                    | 50.8       |                                                | $          | 32.6 |   | $ | 140.4 |   | $ | 103.1 |   |
| Loss from discontinued operations                                                               |       | (38.6                                                | )          | (3.1                                                | )          | (43.8 | ) | (7.2 | ) |
|                                                                                            |       |                                                 |       |                                                |       |   |   |   |   |
| **Net income**                                                                                  |       | $                                                    | 12.2       |                                                | $          | 29.5 |   | $ | 96.6 |   | $ | 95.9 |   |
|                                                                                            |       |                                                 |       |                                                |       |   |   |   |   |
| **Basic earnings per share**                                                                    |       |                                                 |       |                                                |       |   |   |   |   |
| Weighted average common shares outstanding                                                      |       | 171.2                                                |       | 201.0                                               |       | 179.5 |   | 205.4 |   |
| Income from continuing operations                                                               |       | $                                                    | 0.30       |                                                | $          | 0.16 |   | $ | 0.78 |   | $ | 0.50 |   |
| Loss from discontinued operations                                                               |       | (0.23                                                | )          | (0.02                                               | )          | (0.24 | ) | (0.04 | ) |
|                                                                                            |       |                                                 |       |                                                |       |   |   |   |   |
| Basic earnings per share                                                                        |       | $                                                    | 0.07       |                                                | $          | 0.15 |   | $ | 0.54 |   | $ | 0.47 |   |
|                                                                                            |       |                                                 |       |                                                |       |   |   |   |   |
| **Diluted earnings per share**                                                                  |       |                                                 |       |                                                |       |   |   |   |   |
| Weighted average common shares outstanding                                                      |       | 171.2                                                |       | 201.0                                               |       | 179.5 |   | 205.4 |   |
| Dilutive effect of stock options and  unvested restricted stock using the treasury stock method |       | 2.7                                                  |       | 1.2                                                 |       | 2.0 |   | 1.0 |   |
| Weighted average diluted common shares  outstanding                                             |       | 173.9                                                |       | 202.2                                               |       | 181.5 |   | 206.4 |   |
| Income from continuing operations                                                               |       | $                                                    | 0.29       |                                                | $          | 0.16 |   | $ | 0.77 |   | $ | 0.50 |   |
| Loss from discontinued operations                                                               |       | (0.22                                                | )          | (0.02                                               | )          | (0.24 | ) | (0.03 | ) |
|                                                                                            |       |                                                 |       |                                                |       |   |   |   |   |
| Diluted earnings per share                                                                      |       | $                                                    | 0.07       |                                                | $          | 0.15 |   | $ | 0.53 |   | $ | 0.46 |   |

 

5

----

 

The following stock options and unvestedrestricted stock are anti-dilutive and have not been included in the weightedaverage diluted shares outstanding calculation:

 
| ** **                | ** ** | **Three months ended** | ** ** | **Nine months ended** | ** ** |
|---------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **                | ** ** | **2007**                         | ** ** | **2006**                        | ** ** | **2007** | ** ** | **2006** | ** ** |
| Stock options             |       | 3.3                              |       | 10.0                            |       | 5.3 |   | 6.7 |   |
| Unvested restricted stock |       | —                           |       | —                          |       | — |   | 1.0 |   |

 

 

**Note 3 – Acquisition**

** **

On March 30, 2007, Janus increased its ownership of Enhanced InvestmentTechnologies, LLC (“INTECH”) to approximately 86.5% with the purchase of anadditional 4% ownership interest in INTECH for $81.0 million in cash.  The pro forma results of operations have notbeen presented as they would not have been materially different from reportedamounts.

** **

The purchase price allocation resulted in the recognition of $31.7million of intangible assets and $49.3 million of goodwill.  Intangible assets acquired represent customerrelationships which are amortized over 12 years.

 

**Note 4 – Discontinued Operations**

** **

During thethird quarter 2007, Janus initiated a plan to dispose of Rapid Solutions Group(“RSG”), previously reported as the Printing and Fulfillment segment, as aresult of RSG’s difficulty in growing the business and Janus’ desire to focuson its core investment management business.

 

Janus assessed the fair value of RSG less estimated disposal costs andconcluded that as a result of an inability to grow revenues combined with thepossible loss of key contracts due to the expected sale, the carrying value ofRSG had been impaired.  The fair value ofRSG was estimated using market information for comparable transactions withinthe commercial printing industry combined with RSG’s historical operatingdata.  Based on this methodology, a $36.0million impairment charge (net of a $1.6 million tax benefit) was recorded towrite-down the carrying value of RSG to the estimated fair market value lesscosts to sell.  The impairment charge wasallocated as follows; $33.6 million to goodwill (for which no tax benefit hasbeen recorded), $1.4 million to property and equipment, and $1.0 million ofintangible assets from the expected loss of certain client contracts.  

 

Summarized operating results of RSG are as follows:

 
| ** **        | ** ** | **Three months ended** | ** ** | **Nine months ended** | ** ** |
|-------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **        | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **        | ** ** | **2007**                         | ** ** | **2006**                        | ** ** | **2007** | ** ** | **2006** | ** ** |
| Revenues          |       | $                                | 20.8       |                            | $          | 21.1 |   | $ | 66.2 |   | $ | 66.2 |   |
| Expenses          |       | 25.8                             |       | 26.8                            |       | 81.1 |   | 79.7 |   |
| Impairment        |       | 37.6                             |       | —                          |       | 37.6 |   | — |   |
| Operating loss    |       | (42.6                            | )          | (5.7                            | )          | (52.5 | ) | (13.5 | ) |
| Other income, net |       | 0.7                              |       | 0.6                             |       | 2.0 |   | 1.7 |   |
| Tax benefit       |       | 3.3                              |       | 2.0                             |       | 6.7 |   | 4.6 |   |
| Net loss          |       | $                                | (38.6      | )                               | $          | (3.1 | ) | $ | (43.8 | ) | $ | (7.2 | ) |

 

6

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The carrying amounts of the significant classes of assets andliabilities related to discontinued operations are as follows:

 
| ** **                            | ** ** | **September 30,  2007** | ** ** | **December 31,  2006** | ** ** |
|---------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| Cash and cash equivalents             |       | $                            | 49.4       |                        | $          | 52.6 |   |
| Accounts receivable, net              |       | 14.1                         |       | 15.3                        |       |
| Property and equipment, net           |       | 7.8                          |       | 13.1                        |       |
| Goodwill                              |       | 24.2                         |       | 57.8                        |       |
| Intangible assets, net                |       | 7.5                          |       | 14.8                        |       |
| Other assets                          |       | 4.2                          |       | 4.0                         |       |
| Total assets                          |       | $                            | 107.2      |                        | $          | 157.6 |   |
|                                  |       |                         |       |                        |       |
| Accounts payable and accrued expenses |       | $                            | 11.0       |                        | $          | 11.3 |   |
| Deferred income taxes                 |       | 0.8                          |       | 4.9                         |       |
| Other liabilities                     |       | 1.4                          |       | 1.5                         |       |
| Total liabilities                     |       | $                            | 13.2       |                        | $          | 17.7 |   |

 

 

In connection with the classification as discontinued operations, RSG’sintangibles and assets will no longer be subject to depreciation oramortization. 

 

**Note 5 – Adoption of New Accounting Principle**

** **

Janus adopted the provisions of Financial Accounting Standards BoardInterpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”),on January 1, 2007, which sets forth a specific method for the financialstatement recognition and measurement of a tax position taken or expected to betaken on a tax return.  As a result ofthe implementation of FIN 48, Janus reduced its tax contingencies liability by$29.3 million, which had previously been accounted for under the provisions ofStatement of Financial Accounting Standard No. 5, “Accounting forContingencies.”  The reduction in the liabilityand the related change in deferred taxes were accounted for as an increase toretained earnings on January 1, 2007. The tax contingencies liability has been recorded in other long-termliabilities. A reconciliation of the beginning and ending liability is asfollows *(in millions)*:

 
| Balance at January 1, 2007              |   | $     | 59.5   |   |
|-----------------------------------------|--------|-------|--------|--------|
| Cumulative effect of adoption of FIN 48 |   | (29.3 | )      |
| Accrued interest for the current period |   | 1.4   |   |
| Balance at September 30, 2007           |   | $     | 31.6   |   |

** **

** **

A deferred tax asset of $11.4 million has been recorded associated withthe tax contingencies liability.  If thetax contingencies liability and related deferred tax asset are reversed infuture periods, the effective tax rate would be favorably impacted by $20.2million.  

 

Tax returns filed in previous years are subject to audit by variousfederal, state and international taxing authorities and as a result of suchaudits, additional tax assessments may be proposed.  As of September 30, 2007, the majority of taxyears from 1996 and forward remain subject to audit.  Based on information currently available,Janus management does not anticipate any material changes in the liabilitywithin the next twelve months.

 

Taxing authorities generally charge interest and penalties in the eventthat a tax position taken is subsequently reversed upon examination.  Janus has accrued interest on its uncertaintax provisions based on the rates specified by the applicable taxingauthorities and has recorded the interest as a component of the taxprovision.  At September 30, 2007, $9.8million of accrued interest is included in the liability for taxcontingencies.  Any potential penaltiesassociated with a tax contingency will also be included as a component of thetax provision in the period

 

7

----

 

in which the assessment of a penalty becomes likely.  Janus does not believe that it is subject toany penalties related to its tax contingencies and therefore, has not accrued aliability for tax penalties.

 

In the event of an overpayment of income taxes, taxing authoritiesgenerally pay interest from the date of the overpayment through the date onwhich an amended return is filed.  Janusrecords interest income from taxing authorities as a component of the taxprovision.  

 

**Note 6 – Long-Term Debt**

 

On June 14, 2007, Janus issued $300.0 million of 6.250% Senior Notesdue June 15, 2012, and $450.0 million of 6.700% Senior Notes due June 15, 2017(collectively the “2007 senior notes”). Interest will be paid semiannually on June 15 and December 15 of eachyear, beginning December 15, 2007.   Theproceeds from the June 14, 2007 issuances were $748.4 million.  On June 26, 2007, approximately $160.0million of the total proceeds were used to repay the 7.875% Senior Notes due2032 plus accrued and unpaid interest as of the redemption date.  The remaining proceeds may be used forpossible future acquisitions, the repurchase of Janus’ common stock, and/orgeneral corporate purposes.

 

**Note 7 – Long-Term Incentive Compensation**

** **

Janus generally grants annual long-term incentive awards in February ofeach year.  The February 2007 granttotaled $61.0 million and consisted of $21.7 million of restricted stock (0.9million shares at $21.01 per share), $12.8 million of stock options and $26.5million of mutual fund units and will be recognized over a four-year period,subject to accelerated vesting if certain financial performance criteria areachieved.  Additional long-term incentiveawards granted during 2007 include $3.4 million of restricted stock which willgenerally be recognized over a four-year period and are not subject toacceleration.

 

A total of 1.8 million options with a grant date fair value of $7.02per option were awarded as part of the 2007 annual grant.  The grant date fair value of stock optionswas determined using the Black-Scholes model with the following assumptions:expected volatility of 28%, dividend yield of 0.22%, risk-free interest rate of4.86% and an expected life of five years.

 

**Note 8 – Other Income, Net**

** **

The components of other income represent investment income andinvestment gains, net of losses, as follows *(in millions)*:

 
| ** **           | ** ** | **Three months ended** | ** ** | **Nine months ended** | ** ** |
|----------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **           | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **           | ** ** | **2007**                         | ** ** | **2006**                        | ** ** | **2007** | ** ** | **2006** | ** ** |
| Gains, net of losses |       | $                                | 0.5        |                            | $          | 2.3 |   | $ | 1.7 |   | $ | 6.8 |   |
| Dividend income      |       | 5.9                              |       | 2.7                             |       | 11.8 |   | 8.1 |   |
| Interest income      |       | 2.5                              |       | 3.0                             |       | 6.8 |   | 8.8 |   |
| Total                |       | $                                | 8.9        |                            | $          | 8.0 |   | $ | 20.3 |   | $ | 23.7 |   |

 

**Note 9– Legal Proceedings**

** **

Janusis subject to various legal proceedings arising from normal businessoperations.  Although there can be noassurances, based on information currently available, management believes thatit is probable that the ultimate outcome of each of the actions will not have amaterial adverse effect on the consolidated financial condition of Janus.  However, an adverse outcome in any of theactions could have a material adverse effect on the financial results of theCompany in the period in which it is recorded. As of September 30, 2007, Janus has no litigation reserves as managementbelieves that the remaining claims made in the civil actions described belowhave little or no merit and intends to defend against them.

 

 

8

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***Market Timing Litigation***

*** ***

Followingthe market timing investigations by the New York Attorney General (“NYAG”) andthe SEC, Janus and certain affiliates were named as defendants in aconsolidated lawsuit in the U.S. District Court in Baltimore, Maryland (*Case Number MDL No. 1586, 04-MD-15863*).  Five amended complaints were filed in thesecoordinated proceedings, including: (i) claims by a putative class of Janusfund investors asserting claims on behalf of the investor class (*Marini, et al. v. Janus Investment Fund, et al., U.S. District Court,District of Maryland, Case No. 04-CV-00497*);  (ii) derivative claims by investors in theJanus funds ostensibly on behalf of the Janus funds (*Steinberg etal. v. Janus Capital Management, LLC et al., U.S. District Court, District ofMaryland, Case No. 04-CV-00518*); (iii) claims on behalf of participantsin the Janus 401(k) plan (*Wangberger v. JanusCapital Group Inc., 401(k) Advisory Committee, et al., U.S. District Court,District of Maryland, Case No. JFM-05-2711*); (iv) claims brought onbehalf of shareholders of Janus on a derivative basis against Janus’ Board ofDirectors (*Chasen v. Whiston, et al., U.S. District Court,District of Maryland, Case No. 04-MD-00855*); and (v) claims by aputative class of Janus shareholders asserting claims on behalf of theshareholders (*Wiggins, et al. v. Janus Capital Group Inc.,et al.*, *U.S. District Court,District of Maryland, Case No. 04-CV-00818).*

* *

InAugust 2005, the U.S. District Court entered orders dismissing most of theclaims asserted against the Company and its affiliates by fund investors in the*Marini* and *Steinberg*cases described above, except certain claims under Section 10(b) of theSecurities Exchange Act of 1934 and under Section 36(b) of the InvestmentCompany Act of 1940.  The U.S. DistrictCourt also entered an order dismissing all claims in the *Wiggins*lawsuit.  Plaintiffs have appealed thatdismissal.  In August 2006, the U.S.District Court in the *Wangberger*401(k) plan class action dismissed the action with prejudice, and the plaintiffappealed the dismissal to the U.S. Court of Appeals for the FourthCircuit.  Finally, the U.S. DistrictCourt also dismissed the *Chasen* lawsuitagainst Janus’ Board of Directors without leave to amend, ruling that theplaintiff had failed to make a pre-suit demand on the Board of Directors asrequired by applicable state law. The time to appeal this dismissal hasexpired.  As a result of the aboveevents, the Company and Janus Capital Management LLC (“JCM”) are the remainingdefendants, in some capacity, in one or more of the actions described in thepreceding paragraph.  

 

Aspreviously disclosed, the Auditor of the State of West Virginia, in hiscapacity as securities commissioner, initiated administrative proceedingsagainst many of the defendants in the market timing cases (including Janus) andseeks disgorgement and other monetary relief based on similar market timingallegations (*In the Matter of Janus Capital Group Inc. etal., Before the Securities Commissioner, State of West Virginia, Summary OrderNo. 05-1320*).  In September2006, Janus filed its answer to the Auditor’s summary order institutingproceedings, and requested a hearing.  Ahearing was held in June 2007, during which the parties were ordered to submita scheduling order.  In addition to arecently filed Motion to Discharge Order to Show Cause, Janus continues tochallenge the statutory authority of the Auditor to bring such an action.

 

***Excessive Fee Litigation***

 

JCMwas a defendant in a consolidated lawsuit challenging the investment advisoryfees charged by JCM to certain funds managed by JCM *(WalterSins, et al. v. Janus Capital Management, LLC, U.S. District Court, District ofColorado, Case No. 04-CV-01647-WDM-MEH; Michael Fleisher*, *et al. v. Janus Capital Management LLC, 04-CV-02395-MSK-CBS)*(collectively,“Excessive Fee Litigation”*)*.  TheExcessive Fee Litigation was filed by fund investors asserting breach offiduciary duty under Section 36(b) of the Investment Company Act of 1940.  The parties entered into a Stipulation ofDismissal and the Court dismissed the matter in May 2007.

 

9

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***IPO Antitrust Litigation***

*** ***

In2001, a Janus subsidiary was named as a defendant in a class action suit filedin the U.S. District Court for the Southern District of New York.  *(Pfeiffer v. Credit SuisseFirst Boston, U.S. District Court, Southern District of New York, Case No.01-CV-2014)*.  The suit allegesthat certain underwriting firms and institutional investors violated antitrustlaws in connection with initial public offerings.**TheU.S. District Court dismissed the plaintiff’s antitrust claims in November2003.  In September 2005, the U.S. Courtof Appeals for the Second Circuit vacated the U.S. District Court’s decision todismiss the claims and remanded the case for further proceedings.  In March 2006, the defendants, including theJanus subsidiary, filed a *Petition for a Writ ofCertiorari*with the U.S. Supreme Court to review the U.S. Court ofAppeal’s decision.  The U.S. SupremeCourt granted the *Petition for a Writ of Certiorari*andheard arguments on the matter in March 2007. In June 2007, the U.S. Supreme Court ruled in favor of the defendants,including the Janus subsidiary, holding that “the securities law implicitlyprecludes the application of the antitrust laws to the conduct alleged in thiscase.”

 

***Miscellaneous Proceedings***

 

On July 31, 2007, Edward Keely, a former portfolio manager, filed suitagainst a Janus subsidiary, alleging that it implemented certain changes to hiscompensation arrangement in violation of prior agreements between him and theCompany *(Edward Keely v. Janus Management HoldingsCorporation, Denver District Court, Case No. 2007 CV 7366*).  Janus answered the complaint on August 28,2007, denying any liability and challenging the merits of Mr. Keely’sallegations.  Trial is scheduled tocommence in June 2008.

 

10

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| **Item 2.** | **Management’s Discussion and  Analysis of Financial Condition****and Results of Operations** |
|-------------|----------------------------------------------------------------------------------------------------|

** **

**FORWARD-LOOKING STATEMENTS**

** **

*This Quarterly Report on Form 10-Q contains “forward-looking statements”within the meaning of the Private Securities Litigation Reform Act of1995.  In addition, Janus Capital GroupInc. (“Janus” or the “Company”) may make other written and oral communicationsfrom time to time that contain such statements. Forward-looking statements include statements as to industry trends andfuture expectations of the Company and other matters that do not relatestrictly to historical facts and are based on certain assumptions bymanagement.  These statements are oftenidentified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,”“intend,” “could,” “should,” “estimate” or “continue,” and similar expressionsor variations.  These statements arebased on the beliefs and assumptions of the management of the Company based oninformation currently available to management. Such forward-looking statements are subject to risks, uncertainties andother factors that could cause actual results to differ materially from futureresults expressed or implied by such forward-looking statements. Importantfactors that could cause actual results to differ materially from theforward-looking statements include, among others, the risks described in ourfilings with the Securities and Exchange Commission, including those in Part I,Item 1A, Risk Factors, and elsewhere in Janus’ Annual Report on Form 10-K forthe year ended December 31, 2006, and in Part II, Item 1A, Risk Factors, inthis Form 10-Q .  Janus cautions readersto carefully consider such factors.  Furthermore,such forward-looking statements speak only as of the date on which suchstatements are made.  Janus undertakes noobligation to update any forward-looking statements to reflect events orcircumstances after the date of such statements.*

 

**AVAILABLE INFORMATION**

** **

Copies of Janus’ filings with the Securities and Exchange Commission (“SEC”)can be obtained from the SEC’s Public Reference Room at 100 F Street, N.E.,Washington, D.C. 20549.  Information canbe obtained about the operation of the Public Reference Room by calling the SECat 1-800-SEC-0330.  The SEC alsomaintains an Internet site that contains reports, proxy and informationstatements, and other information regarding issuers that file electronically withthe SEC at http://www.sec.gov.  

 

Janus makes available free of charge its annual reports on Form 10-K,quarterly reports on Form 10-Q and current reports on Form 8-K and amendmentsthereto as soon as reasonably practical after such filing has been made withthe SEC.  Reports may be obtained throughthe Investor Relations section of Janus’ website (http://ir.janus.com) or bycontacting Janus at (303) 691-3905. The contents of Janus’ website are not incorporated herein for anypurpose.

 

Janus’ Officer Code of Ethics for Principal Executive Officer andSenior Financial Officers (including its chief executive officer, chieffinancial officer and controller) (the “Officer Code”); Corporate Code ofBusiness Conduct and Ethics for all employees; corporate governance guidelines;and the charters of key committees of the Board of Directors (including theAudit, Compensation, and Nominating and Corporate Governance committees) areavailable on its website (http://ir.janus.com/governance.cfm), and printedcopies are available to any shareholder upon request by calling Janus at (303)691-3905.  Any future amendments to or waivers of the Officer Code will beposted to the Janus website.

 

**RESULTS OF OPERATIONS**

** **

**Overview**

 

Janus derives substantially all of its revenue and net income from itsInvestment Management operations, which provides investment management andadministrative services to mutual funds, separate accounts and institutionalclients in both domestic and international markets.  Janus provides investment advisory servicesthrough its primary subsidiaries, Janus Capital Management LLC (“JCM” or “Janusex-INTECH”) and Enhanced Investment Technologies, LLC (“INTECH”).  The Company also owns a printing andfulfillment business (the “Printing and Fulfillment operations”).  In September 2007, Janus committed to a planto pursue the sale of the Printing and Fulfillment operations and accordingly,it has been reported as discontinued operations. 

 

11

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Revenues are generally based upon a percentage of the market value ofassets under management and are calculated as a percentage of the daily averageasset balance in accordance with contractual agreements with the Company’smutual funds, separate accounts and subadvised relationships (collectivelyreferred to herein as “products” or “investment products”).  Certain investment products are also subjectto performance fees which vary based on their relative performance as comparedto a benchmark index and the level of assets subject to such fees.  Assets under management primarily consist ofdomestic and international equity and debt securities.  Accordingly, fluctuations in the financialmarkets, relative investment performance, sales and redemptions of investmentproducts, and changes in the composition of assets under management are allfactors that have a direct effect on Janus’ operating results.

 

**INVESTMENT MANAGEMENT OPERATIONS**

** **

Highlights for the current quarter include:

 

•                  Janusex-INTECH net flows were positive for the second consecutive quarter. 

•                  Asof September 30, 2007, approximately 89%, 73% and 67% of the funds in theCompany’s primary fund family, Janus Investment Fund (“JIF”), were in the tophalf of their Lipper categories on a one-, three- and five-year total returnbasis, respectively. 

•                  Netincome from continuing operations was $50.8 million, or $0.29 per dilutedshare.

•                  Janusrepurchased 6.5 million shares of its common stock at a total price of $183.5million. 

** **

**Assets Under Management and Flows**

** **
| ** **                      | ** ** | **Three months ended September 30,** | ** ** | **Nine months ended September 30,** | ** ** |
|---------------------------------|------------|----------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                      | ** ** | **2007**                                                 | ** ** | **2006**                                                | ** ** | **2007** | ** ** | **2006** | ** ** |
| ** **                      | ** ** | **(in billions)**                                   | ** ** | **(in billions)**                                  | ** ** |
|                            |       |                                                     |       |                                                    |       |   |   |   |   |
| Beginning of period assets      |       | $                                                        | 190.6      |                                                    | $          | 153.4 |   | $ | 167.7 |   | $ | 148.5 |   |
| Long-term sales                 |       |                                                     |       |                                                    |       |   |   |   |   |
| Janus ex-INTECH                 |       | 9.2                                                      |       | 3.3                                                     |       | 24.4 |   | 13.8 |   |
| INTECH                          |       | 2.0                                                      |       | 3.2                                                     |       | 11.5 |   | 12.6 |   |
| Long-term redemptions           |       |                                                     |       |                                                    |       |   |   |   |   |
| Janus ex-INTECH                 |       | (6.3                                                     | )          | (5.2                                                    | )          | (20.0 | ) | (19.3 | ) |
| INTECH                          |       | (4.2                                                     | )          | (1.4                                                    | )          | (9.4 | ) | (4.1 | ) |
| Long-term net flows *           |       |                                                     |       |                                                    |       |   |   |   |   |
| Janus ex-INTECH                 |       | 2.9                                                      |       | (1.9                                                    | )          | 4.4 |   | (5.5 | ) |
| INTECH                          |       | (2.2                                                     | )          | 1.8                                                     |       | 2.1 |   | 8.5 |   |
| Total long-term net flows       |       | 0.7                                                      |       | (0.1                                                    | )          | 6.5 |   | 3.0 |   |
| Net money market flows          |       | 8.1                                                      |       | 0.3                                                     |       | 10.9 |   | 0.7 |   |
| Market / fund performance       |       | 8.6                                                      |       | 4.7                                                     |       | 22.9 |   | 6.1 |   |
| End of period assets            |       | $                                                        | 208.0      |                                                    | $          | 158.3 |   | $ | 208.0 |   | $ | 158.3 |   |
|                            |       |                                                     |       |                                                    |       |   |   |   |   |
| Average assets under management |       | $                                                        | 193.5      |                                                    | $          | 153.2 |   | $ | 184.6 |   | $ | 153.9 |   |

 

----

| *      | Excludes  money market flows.  Sales and  redemptions of money market funds        |
|--------|-----------------------------------------------------------------------------------------|
|   | are  presented net on a separate line due to the short-term nature of the  investments. |

 

Average assets under management increased 26.3% and 19.9% for thethree- and nine-month periods ended September 30, 2007, respectively, ascompared to the same periods in 2006. The increase in average assets under management is a result of market appreciation/fundperformance and positive net flows.  

 

12

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INTECH experienced net outflows for the first quarter since itsacquisition by Janus in 2002.  INTECHoutflows are partially attributable to the recent relative underperformance ofcertain key investment strategies. Continued underperformance may lead to additional INTECH outflows. 

 

**Results of Investment Management Operations **

** **

##### ***Three Months Ended September 30, 2007, Compared with ThreeMonths Ended September 30, 2006***

##### *** ***

***Revenues***

*** ***

Investment management fees increased $45.0 million, or 24.5%, as aresult of the 26.3% increase in average assets under management.

 

Performance fees have historically been earned on certain INTECHinstitutional accounts.  Beginning in thefirst quarter 2007, certain mutual funds also became subject to performancefees.   The increase in performance feerevenue was primarily due to performance fees earned on mutual funds, partiallyoffset by lower fees on INTECH institutional accounts as a result of recentrelative underperformance.

 

Shareowner servicing fees and other revenue improved over thecomparable prior year period primarily as a result of an increase in transferagent fees which are based on average JIF assets under management, excludingmoney market assets.  Average JIF assetsincreased 24.0% over third quarter 2006.   

 

***Expenses***

* *

Employee compensation and benefits increased from the same period lastyear, principally due to higher base salaries, investment team compensation andcommissions.  Base salaries increased$2.8 million from annual merit raises and growth in the number ofemployees.  Investment team compensationincreased $11.1 million due to higher management fee revenue and relativeinvestment performance.  The investmentteam compensation plan implemented in the first quarter 2007 is linked toindividual long-term performance, but also ties the aggregate level ofcompensation to investment management fee revenue.  As management fee revenue increases, investmentmanagement compensation is expected to increase as well.  Sales commissions increased $2.6 million dueto higher fund sales.

 

Long-term incentive compensation declined quarter-to-quarter due to thefinal vesting of the 2002 restricted stock grant in the first quarter 2007,partially offset by an increase related to the 2007 annual grant awarded inFebruary.

 

Distribution expense increased $9.3 million, or 35.6%, primarily as aresult of the growth in assets under management subject to third-partyconcessions.  Distribution fees arecalculated based on a contractual percentage of the market value of assetsunder management distributed through third-party intermediaries.

 

Interest expense for the three months ended September 30, 2007,increased $10.8 million as a result of an increase in outstanding debt from$650.4 million as of September 30, 2006, to $1,127.6 million as of September30, 2007.

 

##### ***Nine Months Ended September 30, 2007, Compared with NineMonths Ended September 30, 2006***

##### *** ***

***Revenues***

*** ***

Investment management fees increased $93.9 million, or 16.9%, as aresult of a 19.9% increase in average assets under management.

 

Performance fees declined as a result of the relative underperformanceof certain INTECH accounts, partially offset by mutual fund performance fees of$6.3 million.

 

Shareowner servicing fees and other revenue increased $18.1 million, or14.4%, as a result of higher transfer agent fees driven by a 15.6% growth inJIF average assets under management. 

 

13

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***Expenses***

* *

Employee compensation and benefits increased $33.0 million due tohigher base salaries, investment team compensation and commissions.  The increase in investment team compensationis attributable to higher management fee revenue and relative investmentperformance.  Commissions increased as aresult of improved fund sales.

 

Long-term incentive compensation decreased $12.5 million as a result ofthe final vesting of the 2002 restricted stock grant, partially offset by anincrease related to the 2007 annual grant and departure-related acceleration ofawards.  Grants made during the ninemonths ended September 30, 2007, totaled $64.4 million and will generally berecognized over a weighted average period of 4.0 years, assuming no accelerationof vesting.  These awards are generallysubject to accelerated vesting if certain performance criteria are achieved.

 

Marketing and advertising expenses were down $3.1 million in thecurrent period primarily as a result of higher fund proxy costs in thecomparable prior year period, partially offset by higher print advertisingexpenses in the current period.  Janusinitiated a new advertising campaign in the second quarter 2007 to focusadditional spending on the promotion and awareness of the Janus brand. 

 

Distribution expense increased $20.4 million as a result of the growthin assets under management subject to third-party concessions.  

 

**DISCONTINUED OPERATIONS**

** **

**Business Overview**

** **

The Printing and Fulfillment operations, represented by Rapid SolutionsGroup (“RSG”), provide clients with digital and offset printing and fulfillmentservices.  The digital operation focuseson providing clients with communication solutions using leading-edgeprint-on-demand technology and software applications that support the processof improving the effectiveness of customer communication throughpersonalization and customization. * *The offset printing operationsprovide customers with full-service graphics and design solutions throughprepress services and high-speed, high-quality offset printing, including directmarketing packages, brochures, preprinted base stock and collateralpieces.  

 

During the third quarter 2007, Janus initiated a plan to dispose of RSGas a result of RSG’s difficulty in growing the business and Janus’ desire tofocus on its core investment management business.

 

**Results of Discontinued Operations**

** **

Productionvolume and revenue for three- and nine-month periods ended September 30, 2007,are comparable to the same periods in the prior year.  Current period operating results include a$37.6 million impairment charge to write-down RSG’s carrying value tomanagement’s estimate of fair value less costs to sell.  Estimated fair value was based on market datafrom recent transactions in the commercial printing industry combined with RSG’shistorical operating data.  Also factoredin to the valuation was RSG’s inability to grow revenues and the potential lossof certain client contracts as a result of the expected sale.

 

Although Janusis pursuing the disposal of RSG, a sale price has not yet been negotiated.  A gain or additional loss may be recognizedto the extent that the actual sale price varies from management’s estimate offair value less costs to sell.  Janusexpects to dispose of RSG within the next twelve months.

 

As a result ofclassifying RSG as discontinued operations, depreciation and amortization willno longer be recognized on the assets related to the printing and fulfillmentoperations.

 

14

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**LIQUIDITY AND CAPITAL RESOURCES**

** **

**Cash Flows**

** **

A summary of consolidated cash flow data from continuing operations forthe nine-month periods ended September 30, 2007 and 2006 is as follows *(in millions)*:

 
| ** **                              | ** ** | **2007**   | ** ** | **2006**   | ** ** |
|-----------------------------------------|------------|------------|------------|------------|------------|
| Cash flows provided by (used for):      | ** ** | ** ** | ** ** | ** ** | ** ** |
| Operating activities                    |       | $          | 203.8      |       | $          | 197.5 |   |
| Investing activities                    |       | (36.2      | )          | (182.2     | )          |
| Financing activities                    |       | (69.3      | )          | (106.5     | )          |
| Net change in cash and cash equivalents |       | 98.3       |       | (91.2      | )          |
| Balance beginning of period             |       | 507.1      |       | 501.0      |       |
| Balance end of period                   |       | $          | 605.4      |       | $          | 409.8 |   |

 

Janus’ cash flow from operations historically has been positive andsufficient to fund ordinary operations and capital requirements.  Cash provided by operating activities for thenine months ended September 30, 2007, increased from the cash provided byoperating activities for the prior year period as a result of changes inworking capital items, which can vary from period to period based on the timingof cash receipts and payments.

 

Cash used for investing activities for the nine months ended September30, 2007, includes $81.0 million for the purchase of an additional 4% interestin INTECH and $58.4 million of proceeds from the net sale of investments.  Cash provided by investing activities for thecomparable prior year period primarily represents an acquisition of a 5%interest in INTECH and $113.1 million of cash escrowed for the repayment ofdebt.

 

Cash provided by financing activities for the nine months endedSeptember 30, 2007, includes $748.4 million of proceeds from the issuance oflong-term debt, offset by repayment of $158.1 million of long-term debt andstock buybacks of $675.6 million.  Cashused for financing activities for the comparable prior year consists primarilyof common stock repurchases of $388.4 million, partially offset by $275.0million of proceeds from the issuance of long-term debt.

 

**Other Sources of Liquidity**

 

*Credit Facility*

* *

On June 1, 2007, the Company and the syndicate of banks amended theexisting $200 million Three-Year Competitive Advance and Revolving CreditFacility Agreement (the “Credit Facility”). Under the amended Credit Facility, the bank syndicate’s commitment hasbeen increased to $350 million, and the maturity date has been extended fromOctober 19, 2008, to June 1, 2012.  TheCredit Facility contains a number of financial covenants including a specifiedfinancing leverage ratio and interest coverage ratio.  At September 30, 2007, there were noborrowings under the Credit Facility.

 

*Shelf Registration*

* *

In June 2007, the Company filed a new Shelf Registration Statement (“ShelfRegistration”) on Form S-3 that registered an indeterminate amount of Janus’common stock, preferred stock and debt securities.  This Shelf Registration was effectiveimmediately upon filing under new SEC regulations permitting “well-knownseasoned issuers” to register an unlimited amount of securities to be issuedfrom time to time at indeterminate prices. The Shelf Registration replaces the $325 million remaining under Janus’previous shelf registration.  Theissuances of debt described below were issued under the Shelf Registration.

 

15

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*Debt*

* *

On June 14, 2007, Janus issued $300.0 million of 6.250% Senior Notesdue June 15, 2012, and $450.0 million of 6.700% Senior Notes due June 15, 2017(collectively, the “2007 senior notes”). Interest will be paid semiannually on June 15 and December 15 of eachyear, beginning December 15, 2007.   Theproceeds from the June 14, 2007, issuances were $748.4 million.  On June 26, 2007, approximately $160.0million of the total proceeds were used to repay the 7.875% Senior Notes due2032 plus accrued and unpaid interest as of the redemption date.  The remaining proceeds may be used forpossible future acquisitions, the repurchase of Janus’ common stock; and/orgeneral corporate purposes.

 

If the Company experiences a change of control and the 2007 seniornotes are rated below investment grade by Standard & Poor’s Rating Service(“S&P”) and Moody’s Investors Service, Inc. (“Moody’s”), the Company mustoffer to repurchase all of the 2007 senior notes at a price equal to 101% ofthe principal amount plus accrued and unpaid interest to the repurchase date.

 

The terms of the 2007 senior notes also include an interest rateadjustment that provides that the interest rate payable on 2007 senior noteswill increase by 25 basis points for each level that the Company’s debt ratingis decreased by Moody’s from its existing rating of Baa3 or by S&P from itsexisting rating of BBB-, up to a maximum increase of 200 basis points.  If at any time after the interest on the newnotes has been adjusted upward; either Moody’s or S&P increases its ratingon the new notes, then for each level of such increase in the rating, theinterest payable on the new notes will be decreased by 25 basis points, but inno event to a rate less than the interest rate payable on the date of theirissuance.  The interest rate adjustmentcovenant will permanently terminate if the new notes become rated Baa2 by Moody’sand BBB by S&P (or higher), with a stable or positive outlook regardless ofany subsequent decrease in the ratings by either or both rating agencies.

 

In addition, Janus entered into supplemental indentures to add the sameinterest rate adjustment covenant to the terms of all of its outstanding 5.875%Senior Notes due September 15, 2011, 6.119% Senior Notes due April 15, 2014,and 7.750% Senior Notes due June 15, 2009.

 

Annual interest expense is expected to increase approximately $36.6million from the issuance of debt on June 14, 2007, and the debt repayment onJune 26, 2007.

 

*INTECH Put/Call Rights*

* *

Each fiscal year beginning in 2008 and terminating in 2012, each of thetwo INTECH founding members has the option to require Janus to purchase up toapproximately 25% of their current holdings of INTECH shares (“Annual OptionShares”) at the fair market value on the date of exercise based on a valuationby an independent investment bank.  As ofJune 30, 2007, each of the two founders owns approximately 6% of INTECH.  In the event that either INTECH founder doesnot fully exercise his annual voluntary sale option in a given year, Janus hasthe option to require the INTECH founder to sell the remaining balance of theAnnual Option Shares at fair market value on the date of exercise.

 

In addition, the founders can require Janus to purchase their INTECHinterests when the founder’s employment is terminated.  The purchase price of the departing founder’sINTECH interests will be based on the fair market value on the date of exercisebased on a valuation by an independent investment bank.  Each founder is entitled to retainapproximately twenty percent of his current INTECH shares after employmentuntil his death unless he is terminated for cause or leaves voluntarily whilenot in good standing .  An INTECH founderwill be deemed to be in good standing if he voluntarily leaves on or afterJanuary 1, 2009, after providing 12 months’ prior notice and provided hecooperates with the transition.

 

**Item3.     Quantitative and QualitativeDisclosures about Market Risk**

** **

The Company has had no significant changes inits exposure to market risks from that previously reported in the Company’sAnnual Report on Form 10-K for the year ended December 31, 2006 other than thepotential change in interest rates on the Company’s debt in the event of a changein credit ratings by Moody’s or S&P. See discussion of debt in Part I, Item 2 - Liquidity and CapitalResources.

 

16

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**Item 4.     Controls andProcedures**

** **

Janus’ management evaluated the effectiveness of the design andoperation of its disclosure controls and procedures (as such term is defined inRules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30,2007.  Disclosure controls and proceduresare the controls and other procedures that the Company designed to ensure thatit records, processes, summarizes and reports in a timely manner theinformation it must disclose in reports that it files with or submits to theSEC.  Gary Black, Chief ExecutiveOfficer, and Gregory Frost, Senior Vice President and Chief Financial Officer,reviewed and participated in this evaluation. Based on this evaluation, Messrs. Black and Frost concluded that as ofthe date of their evaluation, Janus’ disclosure controls and procedures wereeffective.

 

There has been no change in Janus’ internal controls over financialreporting (as such term is defined in Rules 13a-15(e) and 15d-15(e) under theExchange Act) during the three months ended September 30, 2007, that hasmaterially affected, or is reasonably likely to materially affect, Janus’internal controls over financial reporting.

 

17

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**PART II – OTHER INFORMATION**

** **

**Item 1.****                                   LegalProceedings **

** **

See Part I, Item 1. Financial Statements, Note 9 – Legal Proceedings.

 

**Item 1A.           RiskFactors**

** **

The Company has had no significant changes inits risk factors from those previously reported in the Company’s Annual Reporton Form 10-K for the year ended December 31, 2006 other than those listedbelow:

 

*Janus’ results are dependent onits ability to attract and retain key personnel.*

* *

The investment management business is highly dependent on the abilityto attract, retain and motivate highly skilled, and often highly specialized,technical, executive, sales and management personnel.  The market for investment and salesprofessionals is extremely competitive and is increasingly characterized by thefrequent movement of portfolio managers, analysts and salespersons amongdifferent firms.  Any cost reductioninitiative, changes to management structure, shifts in corporateculture, changes to corporate governance authority, oradjustments or reductions to compensation (including, but notlimited to, the implementation of the new portfolio managers’ compensationprogram that is tied to the Company’s revenue) could result in legal claims andcould impact Janus’ ability to retain key personnel.  If Janus is unable to retain key personnel,it could have an adverse effect on Janus’ results of operations and financialcondition.  Additionally, portfoliomanagers and salespersons often maintain relationships with their clients.  As such, the departure of a portfolio manageror salesperson may cause the loss of clients, which could have an adverseeffect on Janus’ results of operations and financial condition.

 

*Janus’ substantial indebtedness couldadversely affect its financial condition and results of operations.*

* *

As a result of the successful completion of the $750 million debtoffering in June 2007, Janus has a significant amount of indebtedness whichcould limit its ability to obtain additional financing for working capital,capital expenditures, stock repurchases, acquisitions, debt servicerequirements or other purposes.  It mayalso increase Janus’ vulnerability to adverse economic, market and industryconditions, limit Janus’ flexibility in planning for, or reacting to, changesin business operations or to the asset management industry overall, and placeJanus at a disadvantage in relation to competitors that have lower debtlevels.  Any or all of the above eventsand/or factors could have an adverse effect on results of operations andfinancial condition.

 

**Item 2.    Unregistered Sales ofEquity Securities and Use of Proceeds**

** **

On January 23, 2007, Janus’ Board ofDirectors authorized the repurchase of up to an additional $500million of Janus common stock with no expiration date, to take effect when theprior authorization was fully utilized, which occurred on February 27,2007.   On July 24, 2007,Janus’ Board of Directors authorized another $500 million stock repurchaseprogram to take effect when the January 2007 authorization was fully utilized,which occurred on August 15, 2007. During the first nine months of 2007, Janus repurchased 26.3 millionshares at an aggregate cost of $660.2 million under the current and previousauthorizations.  The Company cautionsthat there are no assurances that any future repurchases will actuallyoccur.  

 

In addition to this program, for the nine months ended September 30,2007, Janus repurchased 711,090 shares from employees as a part of a sharewithholding program (established under Rule 10b5-1 of the Securities ExchangeAct of 1934) to satisfy employees’ income tax liabilities attributable to thevesting of restricted stock awards, and 8,744 shares were surrendered to Janusrelated to the exercise of stock options. 

 

18

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| **Period** | ** ** | **(a) Total  Number of  Shares (or  Units)  Purchased** | ** ** | **(b) Average Price  Paid Per Share  (or Unit)** | ** ** | **(c) Total Number of Shares  (or Units) Purchased as Part  of Publicly Announced  Plans or Programs** | ** **     | **(d) Maximum Number (or  Approximate Dollar Value) of  Shares (or Units) that May Yet  Be Purchased Under the Plans  or Programs (End of Month)** | ** ** |
|------------|------------|------------------------------------------------------------------------|------------|---------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| January    |       | 2,195,910                                                              |       | $                                                                         | 21.06      |                                                                                                                                                               | 2,098,186      |                                                                                                                                                                                                                                              | $          | 587 million |   |
| February   |       | 4,944,512                                                              |       | $                                                                         | 21.71      |                                                                                                                                                               | 4,761,600      |                                                                                                                                                                                                                                              | $          | 483 million |   |
| March      |       | 2,970,268                                                              |       | $                                                                         | 20.48      |                                                                                                                                                               | 2,575,500      |                                                                                                                                                                                                                                              | $          | 431 million |   |
| April      |       | 1,590,557                                                              |       | $                                                                         | 23.60      |                                                                                                                                                               | 1,590,557      |                                                                                                                                                                                                                                              | $          | 393 million |   |
| May        |       | 3,814,728                                                              |       | $                                                                         | 26.10      |                                                                                                                                                               | 3,779,800      |                                                                                                                                                                                                                                              | $          | 294 million |   |
| June       |       | 5,024,181                                                              |       | $                                                                         | 27.91      |                                                                                                                                                               | 5,024,181      |                                                                                                                                                                                                                                              | $          | 154 million |   |
| July       |       | 1,833,836                                                              |       | $                                                                         | 29.59      |                                                                                                                                                               | 1,832,900      |                                                                                                                                                                                                                                              | $          | 600 million |   |
| August     |       | 4,198,000                                                              |       | $                                                                         | 28.01      |                                                                                                                                                               | 4,198,000      |                                                                                                                                                                                                                                              | $          | 482 million |   |
| September  |       | 458,566                                                                |       | $                                                                         | 25.87      |                                                                                                                                                               | 450,000        |                                                                                                                                                                                                                                              | $          | 471 million |   |
| **Total**  | ** ** | **27,030,558**                                                         | ** ** | **$**                                                                     | **24.99**  | ** **                                                                                                                                                         | **26,310,724** | ** **                                                                                                                                                                                                                                        | ** ** | ** ** |

 

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**Item 6.    Exhibits**

 
| 31.1   | Certification of Gary D. Black, Chief Executive Officer of Registrant                                                                                                                                          |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                           |
| 31.2   | Certification of Gregory A. Frost, Senior Vice President and Chief  Financial Officer of Registrant                                                                                                            |
|   |                                                                                                                                                                                                           |
| 32.1   | Certification of Gary D. Black, Chief Executive Officer of  Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002                              |
|   |                                                                                                                                                                                                           |
| 32.2   | Certification of Gregory A. Frost, Senior Vice President and Chief  Financial Officer of Registrant, pursuant to 18 U.S.C. Section 1350, as  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|   |                                                                                                                                                                                                           |
| 99.1   | Lipper Rankings                                                                                                                                                                                                |

 

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**SIGNATURES**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 

Date:October 25, 2007

 
|   | Janus Capital Group Inc.       |
|--------|--------------------------------|
|   |                           |
|   |                           |
|   | /s/ Gary D. Black              |   |
|   | Gary D. Black,                 |   |
|   | Chief Executive Officer        |   |
|   |                           |   |
|   |                           |   |
|   | /s/ Gregory A. Frost           |   |
|   | Gregory A. Frost,              |   |
|   | Senior Vice President and      |   |
|   | Chief Financial Officer        |   |
|   | (Principal Financial Officer)  |   |
|   |                           |   |
|   |                           |   |
|   | /s/ Robert W. Blakley          |   |
|   | Robert W. Blakley              |   |
|   | Vice President and Controller  |   |
|   | (Principal Accounting Officer) |   |

 

21

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** **

**JANUS CAPITAL GROUP INC.**

**INDEX TO EXHIBITS**

 
| **Exhibit  No.** | ** ** | **Document** | ** **                                                                                                                                                                                                     | **Regulation  S-K  Item 601 (b)  Exhibit No.** |
|------------------|------------|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------|
| 31.1             |       |         | Certification of Gary D. Black, Chief Executive Officer of Registrant                                                                                                                                          |                                           | 31 |
|             |       |         |                                                                                                                                                                                                           |                                           |   |
| 31.2             |       |         | Certification of Gregory A. Frost, Senior Vice President and Chief  Financial Officer of Registrant                                                                                                            |                                           | 31 |
|             |       |         |                                                                                                                                                                                                           |                                           |   |
| 32.1             |       |         | Certification of Gary D. Black, Chief Executive Officer of  Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002                              |                                           | 32 |
|             |       |         |                                                                                                                                                                                                           |                                           |   |
| 32.2             |       |         | Certification of Gregory A. Frost, Senior Vice President and Chief  Financial Officer of Registrant, pursuant to 18 U.S.C. Section 1350, as  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |                                           | 32 |
|             |       |         |                                                                                                                                                                                                           |                                           |   |
| 99.1             |       |         | Lipper Rankings                                                                                                                                                                                                |                                           | 99 |

 

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